fei scholarship foundation 6-30-16 final...fei houston scholarship foundation notes to financial...

FEI HOUSTON SCHOLARSHIP FOUNDATION

INDEX PAGE INDEPENDENT AUDITOR’S REPORT .................................................................................... 1

FINANCIAL STATEMENTS:

STATEMENTS OF FINANCIAL POSITION ............................................................................. 2

STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS ........................................... 3

STATEMENTS OF CASH FLOWS ......................................................................................... 4

NOTES TO FINANCIAL STATEMENTS ................................................................................ 5


See accompanying notes to these financial statements. - 2 -

STATEMENTS OF FINANCIAL POSITION

JUNE 30, 2016 2015

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 185,279 $ 95,225 Scholarship receivable – 1,640 Investments, at fair market value 414,800 255,129 Current pledges receivable 32,500 10,000

Total current assets 632,579 361,994 LONG TERM ASSETS:

Deferred pledges receivable 67,500 – Long-term investment, at fair market value – 70,165

Total long-term assets 67,500 70,165

Total assets $ 700,079 $ 432,159

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES: $ 9,204 $ – NET ASSETS:

Unrestricted 616,375

422,159 Temporarily restricted 74,500 10,000

Total net assets 690,875 432,159

Total liabilities and net assets $ 700,079 $ 432,159



STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS

YEARS ENDED JUNE 30, 2016 2015

UNRESTRICTED

TEMPORARILY

RESTRICTED TOTAL UNRESTRICTED

TEMPORARILY

RESTRICTED TOTAL REVENUES:

Contributions – corporations and individuals

$ 227,864 $ 69,500 $ 297,364 $ 73,429 $ – $ 73,429

Net assets released from restrictions

5,000 (5,000) – 20,000 (20,000) –

Investment income – unrealized gain/(loss)

14,012 – 14,012 (1,088) – (1,088)

Investment income – realized loss – – – (671) – (671) Interest and dividend income 18,418 – 18,418 14,051 – 14,051

Total revenues 265,294 64,500 329,794 105,721 (20,000) 85,721 OPERATING EXPENSES:

Program services – scholarships 44,000 – 44,000 46,360 – 46,360 Program services – other 5,453 – 5,453 4,776 – 4,776 Professional and administrative 21,625 – 21,625 20,330 – 20,330

Total operating expenses 71,078 – 71,078 71,466 – 71,466 CHANGE IN NET ASSETS 194,216 64,500 258,716 34,255 (20,000) 14,255

NET ASSETS, beginning of year 422,159 10,000 432,159 387,904 30,000 417,904

NET ASSETS, end of year $ 616,375 $ 74,500 $ 690,875 $ 422,159 $ 10,000 $ 432,159



STATEMENTS OF CASH FLOWS

YEARS ENDED JUNE 30, 2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES:

Change in net assets $ 258,716 $ 14,255 Unrealized (gain) loss on investments (14,012) 1,088 Realized loss on investments – 671 Adjustments to reconcile the change in net assets to net cash

provided by operating activities: Net change in operating assets and liabilities:

Scholarship receivable 1,640 (1,640) Pledges receivable (90,000) 20,000 Current liabilities 9,204 (4,829)

Net cash provided by operating activities 165,548 29,545 CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of investments (75,494) (185,698) Sale of investments – 49,092

Net cash used in investing activities (75,494) (136,606)

NET CHANGE IN CASH AND CASH EQUIVALENTS 90,054 (107,061)

CASH AND CASH EQUIVALENTS, beginning of year 95,225 202,286

CASH AND CASH EQUIVALENTS, end of year $ 185,279 $ 95,225


NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2016 AND 2015

- 5 -

1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Organization – The FEI Houston Scholarship Foundation (the “Foundation”) is a not-for-profit organization that provides scholarships for Southeast Texas area college students in need of financial assistance.

Tax-Exempt Status – On November 3, 2003, the Foundation received an advanced ruling from the Internal Revenue Service granting exemption from federal income tax under Section 501(a) of the Internal Revenue Code as an organization described in Section 501 (c)(3).

Basis of Accounting – The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Financial Statement Presentation – The Foundation is required to report information regarding its financial position and activities, according to three classes of net assets based upon the existence or absence of donor-imposed restrictions. These classes are as follows:

Unrestricted Net Assets – Net assets not subject to donor-imposed stipulations.

Temporarily Restricted Net Assets – Net assets subject to the donor imposed stipulations that may or will be met either by actions of the Foundation and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

Permanently Restricted Net Assets – Net assets subject to donor-imposed stipulations that must be maintained permanently by the Foundation. Generally, the donors of these assets permit the Foundation to use all or part of the income earned on any related investments for general or specific purposes.

As of June 30, 2016 and 2015, the Foundation’s net assets consisted of unrestricted and temporarily restricted net assets.



JUNE 30, 2016 AND 2015

- 6 -

1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and Cash Equivalents – Cash held in checking accounts, money markets, and investments with maturities of less than three months at the date of purchase are classified as cash and cash equivalents.

Scholarship Receivable – The Foundations records a receivable when the recipient does not utilize the full scholarship and the college has advised the funds are being returned.

Multi-Year Pledges – Unconditional promises to give to the Foundation that extend beyond the current fiscal year are considered multi-year pledges. These multi-year pledges are recorded as pledges receivable and temporarily restricted revenue at the time of the promise at the present value of the expected future cash flows. The temporarily restricted net assets are transferred to unrestricted net assets as each year of the multi-year pledge passes. The Foundation estimates the collectability of these pledges, and when necessary, reduces the carrying value of the pledges by an allowance for uncollectible amounts. All pledges were considered collectible at June 30, 2016 and 2015.

Investments – The Foundation determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as held to maturity when the Foundation has the positive intent and ability to hold the securities to maturity. Debt securities for which the Foundation does not have the intent or ability to hold to maturity are classified as available for sale. Held-to-maturity securities are recorded as either short-term or long-term on the Statement of Financial Position, based on contractual maturity date and are stated at amortized cost. Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in revenues.

The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market.



JUNE 30, 2016 AND 2015

- 7 -

1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Contributions – The Foundation records unconditional contributions received, including promises to give, as revenue when received. Conditional contributions are recognized as revenue when the conditions on which they depend have been substantially met. There have been no conditional contributions received during the years ended June 30, 2016 or 2015.

Scholarships – The Foundation provides academic scholarships annually to accounting or finance students attending accredited colleges and universities in Southeast Texas. The scholarship recipients are selected for their economic need, academic achievements, and extracurricular activity records in their respective schools.

Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Concentration of Credit Risk – Financial instruments which potentially subject the Foundation to concentrations of credit risk consist of cash and investments. The Foundation places its cash with quality financial institutions. At times, such cash balances may be in excess of the federally insured limits. Historically, the Foundation has not experienced any losses due to such concentration.

Uncertain Tax Positions – The Foundation is exempt from income taxes under Internal Revenue Code Section 501(c)(3). The financial effects of a tax position taken or expected to be taken are recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon an examination. Interest and penalties, if any, are included in the expenses in the statement of activities. As of June 30, 2016, the Foundation had no uncertain tax positions that qualify for recognition or disclosure in the financial statements. The Foundation’s tax years of 2013 and forward are subject to examination by federal and state taxing authorities.



JUNE 30, 2016 AND 2015

- 8 -

2. INVESTMENTS

The Foundation follows Accounting Standards Codification (“ASC”) ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities carried at fair value on a recurring basis in the financial statements. ASC 820 provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). An asset or liability’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy under the ASC are described below:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Foundation has the ability to access.

Level 2: Inputs to the valuation methodology include:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in inactive markets;

Inputs other than quoted prices that are observable for the asset or liability;

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value:

Preferred Stock: Stated at fair value as determined by the New York Stock Exchange. Such investments are classified as Level 1.



JUNE 30, 2016 AND 2015

- 9 -

2. INVESTMENTS (continued)

Certificate of Deposit: Valued at the face value plus interest earned. Such investments are classified as Level 1.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Foundation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The Company’s equity securities are classified as trading securities and carried at their fair value based on the quoted market prices of the securities. The certificate of deposit is held to maturity and therefore classified as a held to maturity investment. The investments presented at fair value in the table below represent Level 1 investments. Net realized and unrealized gains and losses on trading securities are included in the Statement of Activities and Changes in Net Assets. The cost of securities sold is based on specific identification.

The composition of investments are as follows:

JUNE 30, 2016

COST FAIR VALUE

UNREALIZED

GAIN

Preferred stock $ 333,121 $ 344,635 $ 11,514 Certificate of deposit 70,165 70,165 –

Total investments $ 403,286 $ 414,800 $ 11,514

JUNE 30, 2015

COST FAIR VALUE

UNREALIZED

LOSS

Preferred stock $ 257,627 $ 255,129 $ (2,498) Certificate of deposit 70,165 70,165 –

Total investments $ 327,792 $ 325,294 $ (2,498)



JUNE 30, 2016 AND 2015

- 10 -

2. INVESTMENTS (continued)

Investment income consists of the following:

JUNE 30, 2016 2015 Interest and dividend income $ 18,418 $ 14,051 Net realized losses – (671) Net unrealized holding gains/(losses) 14,012 (1,088)

Net investment income

$ 32,430

$ 12,292

3. SCHEDULE OF PLEDGES RECEIVABLE

The following table details unconditional promises to give to the Foundation as of June 30, 2016:

2017 $ 32,5002018 32,5002019 15,0002020 15,0002021 5,000

Total $ 100,000

4. SOURCES OF REVENUE

The following table details sources of contributions received by the Foundation:

JUNE 30, 2016 2015 FEI Houston $ 27,000 $ 26,500FEI members 196,864 22,429Corporate sponsors 73,500 24,000Other individuals – 500

Total contributions $ 297,364 $ 73,429



JUNE 30, 2016 AND 2015

- 11 -

5. RELATED PARTY

Financial Executives of Houston, Inc. (formerly known as Financial Executives International – Houston Chapter) (“FEI Houston”) established the Foundation. FEI Houston provides financial backing and resources to the Foundation including contributed funds, contributed services and volunteer time. FEI Houston provided contributions of $27,000 and $26,500 during the years ended June 30, 2016 and 2015, respectively.

The Foundation also receives donated services from unpaid volunteers who assist in fundraising, special projects, and governance. No amounts have been recognized in the Statements of Activities and Changes in Net Assets for these contributed services because the criteria for recognition have not been satisfied.

6. SUBSEQUENT EVENTS

The Foundation has evaluated subsequent events through October 27, 2016, the date which these financial statements were available to be issued. No events or transactions have occurred that would require adjustment to or disclosure in these financial statements.

fei scholarship foundation 6-30-16 final...fei houston scholarship foundation notes to financial...

Documents